SAP's Strong Revenue Suggests Enterprise Software Momentum Into 2012

SAP's strong quarterly results, including a significant rise in software and support revenue, suggest the strength of enterprise IT heading into 2012.

SAP
enjoyed significant increases in software revenue in the fourth quarter of
2011, suggesting that the market's appetite for enterprise IT products remains
strong despite some turbulence in the overall economy.
Total
revenue for the quarter topped $5.8 billion, a year-over-year rise of 11
percent. Software and support revenue rose 16 percent and 13 percent over the
year-ago quarter, respectively, while total operating expenses declined 11
percent.

"We
are well positioned to exceed our [about $25 billion] revenue target and reach
a 35 percent operating margin in 2015," Warner Brandt, CFO of SAP, wrote in a
Jan. 25 statement.

SAP
also indicated that its SuccessFactors acquisition will close in the first
quarter of 2012. The latter company's cloud-based "human capital management
solutions" will buttress SAP's overall cloud assets. The cloud has become an
increasingly contentious battleground for enterprise IT providers over the past
several quarters, as businesses look more to online subscription services to
fulfill their daily needs in a more efficient way. Specifically, SuccessFactors
assets will allow SAP to push back against Salesforce.com and Oracle.
Certainly
software is eclipsing hardware as those IT providers' primary revenue driver.
Oracle, for example, saw its fiscal first-quarter 2012 revenue rise largely on
the strength of software licensing and product support, even as hardware
systems revenue exerted a slight but noticeable drag. Meanwhile, other
companies that specialize solely in software and services-such
as IBM-have enjoyed strong revenue and profits over the past few quarters.
SAP
famously struggled to find its way in the wake of the global recession, which
impacted its clients' bottom lines and willingness to spend heavily on
enterprise IT. The company's revenue dipped throughout 2009, eventually leading
to the ouster of then-CEO Leo Apotheker in February 2010.

Following
that boardroom switchover, SAP saw its revenue increase. It acquired Sybase for
$5.8 billion in May 2010, an expensive move nonetheless viewed as a way to
expand SAP's mobile offerings and stay competitive via new revenue streams.
From that point forward, the question became whether the company could maintain
its momentum while integrating assets from Sybase and other acquisitions.
SAP's
new quarterly numbers suggest that momentum is indeed continuing into 2012. But
as that same corporate interest in software is also bolstering the fortunes of
its competitors, it's likely that SAP will face strong competition over the
next 12 months.
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Nicholas Kolakowski is a staff editor at eWEEK, covering Microsoft and other companies in the enterprise space, as well as evolving technology such as tablet PCs. His work has appeared in The Washington Post, Playboy, WebMD, AARP the Magazine, AutoWeek, Washington City Paper, Trader Monthly, and Private Air. He lives in Brooklyn, New York.